No doubt you’ve heard the word ‘Bitcoin’ being thrown around over recent months. But let’s be honest – most of us have no idea what a cryptocurrency is, how you get it or why so many investors – big and small – are losing their minds over it.
First published December 8, 2017 at whimn.com.au
It looks like we are only going to be hearing more about it, with Bitcoin having passed a number of milestones this week: It flew past $USD10,000 in value and the world’s first Bitcoin billionaires were crowned.
Meet American-identical-twin-venture-capitalist-brothers Cameron and Tyler Winklevoss who are known plural-ly known as the ‘Winklevii’. They sued their former Harvard buddy, Facebook’s Mark Zuckerberg, for allegedly stealing their social networking idea and turning it into a world-dominating online empire. In fact, it was the pay-out the brothers received from Zuckerberg, totalling around $86.5m, that paved their way to Bitcoin riches.
Cameron and Tyler used part of their pay out to invest in the then little-known ‘crypto currency’, buying 100,000 or so Bitcoins when they were worth $160 each. Fast forward a few years and BOOM! At the time of publishing this story, these little babies are now worth around $23,000.
Cameron (L) and Tyler (R) Winklevoss are now Bitcoin billionaires. Photo: AFP
Huh? What’s a cryptocurrency?
You buy, earn and spend Bitcoins online and the beauty is that there’s no central authority, institution or government in the middle meddling with your affairs or profiteering from your efforts. Bitcoin operates as a network, that is, the currency ‘lives’ on software housed on tens of thousands of computers, tablets and smartphones around the world. Each transaction is recorded in a large-scale public database known as ‘the blockchain’, which acts as a public ledger detailing every single Bitcoin transaction ever made.
The beauty of Bitcoin is that they’re limited to 21 million in total, which means absolutely no more than that will ever be created. This makes them a ‘deflationary currency’ that will only increase in value, never decrease.
Okay, so how do you get them?
Either by buying them from other people using the cryptographic software or by ‘mining’ them. To buy Bitcoin with Aussie currency from online exchanges, you need to download a bitcoin digital wallet. It’s free and there’s a wealth of resources available online to take you through the process.
So complicated… Photo: File
Another way you can do it is to become a ‘miner’, but this is not recommended for beginners. Miners work to verify every Bitcoin transaction and keep the network secure and, for their efforts, are rewarded with new Bitcoins. A few years ago, anyone could mine Bitcoins from their home computers but these days the process has become significantly more complicated and requires much smarter and more powerful networks.
Bitcoin wallets can be used to purchase a variety of goods and services if the vendor accepts this as payment, which is increasing in popularity around the world. In fact, when it comes to Bitcoin, there are no boundaries; can pay anyone in the world at any time with a relatively low transaction fee. Many Australian businesses are already on board and there are several Bitcoin ATM machines around country as well.
So why does Bitcoin have a bit of a dodgy reputation?
We’re not going to lie to you, Bitcoin has, in the past, been notorious as the currency of choice for people buying sordid stuff on the Dark Web.
There are also scams; not on the blockchain itself, but on the exchanges, where unsuspecting investors have seen their Bitcoin siphoned off by clever fraudsters.
But its recent extraordinary success suggests many investors are happy to ignore all that and instead focus on the immense profit it’s currently generating for them.
What’s it like investing in Bitcoin?
Perth entrepreneur Leah Rando, 49, first considered buying Bitcoin back in 2015 after a friend suggested it. “At first, I perceived it to be a high-risk gamble; I was quite conservative and not a huge risk taker; I worked too hard for my money and wasn’t prepared to see it disappear in a ‘scam’,” Rando tells whimn.com.au. “At that time one Bitcoin was worth approximately $400 … If only I’d bought some then!!”
Leah Rando is very happy with her investment in Bitcoin. Photo: Supplied
After witnessing the success her friends had achieved and not wanting to be left behind, earlier this year Leah decided it was time for her to re-think her position on Bitcoin. She began researching it more thoroughly and friends invited her to invest in a set platform called BitConnect, which uses Bitcoin as the main source of currency. “My initial investment was in March when Bitcoin were worth approximately $1,464 each. I invested about $665 and I admit, I was a bit nervous!” she says. “But, to date, that investment has been very generous.”
Leah has gone on to make more successful investments and is happy with the returns. Last month, she even purchased her weekly groceries exclusively with the profits in her Bitcoin wallet. “I’m no economist, and I can only share my own experience with you, but I feel very confident Bitcoin is the future,” she says. “I, for one, will be on this ride, up and down.”
Fine, but is Bitcoin a bubble?
Bitcoin, blockchain and other crypto-currencies are being heralded by some international experts as the most profound and game-changing innovation since the invention of the Internet.
Photo: AFP
Others are more sceptical about its long term success. Some prominent economists have publicly described it as a ‘speculative bubble’, including former US Federal Reserve Chairman Alan Greenspan and Nobel Memorial Prize laureate Robert Shiller. Even American business magnate Warren Buffet isn’t sold on it, famously stating in 2014, “”Stay away from it. It’s a mirage, basically.”
But devotees of this innovative new currency argue that these old-school thinkers aren’t seeing the bigger picture and reject the doomsday prophecies. Crypto-currencies to banks have become the Airbnb to hotels and the Uber to taxis; working to decentralise the status quo and establish a new world order where individuals are empowered to take back their autonomy that established institutions have, for so long, denied them.
Regardless, whichever side of the fence you sit, the fact remains that right now Bitcoin and other crypto-currencies are changing the world and making a lot of people enormously rich.
Here at whimn.com.au, we’re certainly not experts in this field and therefore we can’t offer our readers any guidance at all, except to always seek out professional advice and ensure you’ve done some thorough research before making a Bitcoin investment.
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